American Farm Bureau survey: food prices down 10%

The latest food price survey by the American Farm Bureau shows a big drop in food prices compared to one year ago. Iowa Farm Bureau director of research, David Miller, says they conduct a marketbasket survey of 16 food items every quarter. Miller says the overall cost of the marketbasket was $46.03, down 26 cents from the second quarter of this year — but about a $4 or 10% drop from one year ago.

He says the largest drops came in things like cheese, whole milk, ground chuck and potatoes. Miller says the milk cost at the retail level was down 27% from one year ago, cheddar cheese down 23% and potatoes were down 22%. While the prices in stores have dropped, they haven’t dropped in direct correlation to the drop in what farmers and producers are being paid for their raw products. Miller says the foods that require the most processing were slower to drop in price.

Miller says the items that required minimal or no processing like potatoes, showed more of the drop that farmers have seen in what they get for their products. He says milk for example is down almost 50% in the price paid farmers from one year ago, corn and grains are down about 40%, and he says there’s a 25% drop in grocery store on the same items.

Miller says the survey knocks out the argument that the use of grains for ethanol production was causing food prices to go up. He says who in the food versus fuel argument that blamed ethanol, ethanol production is at a record level nationwide and corn prices have dropped 45% from one year ago, beef, potatoes and milk prices have dropped. So he says it was not an “ethanol affect” impacting the food prices, it was a “total world demand affect.” Miller, who is an economist, believes food prices haven’t bottomed out yet.

Miller says: “I think there is some additional room for the marketbasket at the retail level to continue to shrink a little bit relative to the whole commodities. Those prices do tend to come down a little slower and they lag a little bit what’s happening on the farm.” Miller says. He says he doesn’t anticipate an increase in commodity prices unless the dollar weakens.

For a complete list of the 2009 third quarter marketbasket survey results visit the Iowa Farm Bureau website here.